Is the liquidated damages payment for breaching the Caring Transitions non-compete agreement the only remedy available to the franchisor?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
The parties agree that the full extent of the damages that Franchisor will incur if Franchisee fails to comply with its obligations under this Section 15.3 is difficult to ascertain, but the parties nevertheless desire certainty in this matter.
Accordingly, if Franchisee breaches or fail to comply with any of the provisions of subparagraph 15.3(a), Franchisee shall pay Franchisor, as liquidated damages and not as a penalty, a royalty equal to 15% of the gross amount of all income, sales, salary, wages, fees, dividends, distributions, and other compensation received or earned by Franchisee, or any spouse, child, parent, or sibling of Franchisee or of any principal of Franchisee, or to which any of those parties becomes entitled, as the result of the breach or noncompliance.
The parties further agree that the royalty required by this paragraph is reasonable in light of the damages that Franchisor will incur.
This payment is not exclusive of any other remedies that Franchisor may have, including equitable remedies, attorneys' fees, and costs.
- (d) The time period referred to in subparagraph 15.3(a) will be stayed during any violation or breach of the terms thereof.
The covenants in this Section 15.3 will survive the expiration, termination, or transfer of this Agreement.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 41–49)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, the liquidated damages payment for breaching the non-compete agreement is not the exclusive remedy available to the franchisor. If a franchisee breaches the non-compete provisions outlined in subparagraph 15.3(a) of the franchise agreement, they must pay Caring Transitions liquidated damages, which are calculated as 15% of the gross amount of all income, sales, salary, wages, fees, dividends, distributions, and other compensation received or earned by the franchisee, or any spouse, child, parent, or sibling of the franchisee or of any principal of the franchisee, or to which any of those parties becomes entitled, as a result of the breach or noncompliance.
However, the FDD explicitly states that this payment is not the only recourse Caring Transitions has. The franchisor retains the right to pursue other remedies, including equitable remedies, attorneys' fees, and costs. This means that in addition to receiving the liquidated damages payment, Caring Transitions can also seek court orders to enforce the non-compete agreement (equitable remedies) and recover any legal expenses incurred in pursuing the matter.
This provision protects Caring Transitions' interests by ensuring that franchisees who violate the non-compete agreement face significant financial consequences. The liquidated damages provision provides a degree of certainty for both parties, as it establishes a pre-determined amount of compensation for the breach. However, the franchisor's ability to pursue additional remedies provides further protection and flexibility in addressing violations of the non-compete agreement. Prospective franchisees should carefully consider the scope and implications of the non-compete provisions and the potential financial consequences of breaching them.
It is important for potential franchisees to understand that the 15% royalty payment is considered a reasonable estimate of damages and not a penalty. The agreement also specifies that the time period of the non-compete agreement will be extended during any violation or breach of its terms, and that the non-compete obligations survive the expiration, termination, or transfer of the Franchise Agreement.